Eurozone future in doubt as World Bank plays down new Greek loan

President Jim Yong Kim indicated that securing approval from the bank’s board would be difficult and any discussion regarding a loan would prove to be “lively”.

Greece had approached the World Bank over the possibility of a £2.6 billion (€3bn) loan last month to help it pay for a raft of policies to help boost jobs and growth.

Speaking in London, Dr Kim suggested that the World Bank's involvement in a bigger financial package was premature.

EPA

The collapse of the loan would cause chaos in for Greece

Any formal discussions about a loan to Greece are unlikely to take place until Athens is able to secure funds from its European creditors to avoid a summer default.

Dr Kim said a World Bank loan would represent a “completely different step for us”, and require the backing of board members including the UK and US, as well as poorer developing countries such as Zimbabwe.

He said: “In terms of providing loans, no decision has made on that yet. And if we were to do that, this would be a decision that would be made from our entire board.

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World Bank President Jim Yong Kim (L) with Christine Lagarde from the IMF

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“That would be a completely different step for us, and that would have to be – I suspect – a very lively discussion on our board.”

Greece’s left-wing Prime Minster Alexis Tsipras currently resides over a stagnant economy mired in a recession with more than a million Greeks out of work, with youth unemployment a particular problem with a rate of 48 percent.

The prospect of Greece securing another loan is looking to be problematic as Christine Lagarde, the Managing Director of the International Monetary Fund (IMF) said only last week that it was “only halfway through” talks about the IMF participating in a third rescue package worth a total of £73bn (€86bn).

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Greek Prime Minister Alexis Tsipras

Ms Lagarde said: "We are still elaborating under what terms we could possibly give some lending to the country. We are not there yet.”

The prospect of Greece being able to secure funds from its European neighbours looks to be an uphill struggle as data agency Eurostat reported that industrial production within the eurozone countries fell in February with output actually falling by 0.3 percent, taking into account seasonal adjustments.

Bert Colijn, senior economist at ING, said: “Eurozone industrial production is much like England at the World Cup: all the ingredients for strong performance are there, but it’s just not happening.”

Should Greece fail to raise the required funds it would very likely force the country to default on its existing loans starting a chain of events that would see the country leave – or get pushed out – of the euro exerting even more pressure on the troubled currency.

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World Bank President Jim Yong Kim

Greece needs to make a loan repayment in July, and needs the rescue cash to pay it.